FCC Launches Phone Inquiries

Last week, PC World and other news organizations reported that the United States Federal Communications Commission has launched two inquiries into the mobile phone industry. The agency will reportedly look into ways to “spur innovation and competition” within this industry.

The inquiry is the latest in an ongoing investigation that began earlier this year when several senators, including failed presidential hopeful John Kerry, looked into competition in the mobile phone sector. What’s interesting now is that this issue could be as great a divide as the ongoing health care debate – and drawn along party lines.

FCC Chairman Julius Genachowski and two other Democrats on the commission have called for more innovation and greater competition, whilst the commission’s two Republicans have reportedly questioned whether the FCC should get more involved. The GOP members of the commission, including Robert McDowell, stressed that 94 percent of U.S. residents have at least four mobile carriers to choose from, so is competition really an issue.

Not to take political sides, but this reporter is in agreement with McDowell and his colleague. Innovation isn’t something that can be mandated. The government can’t say to an industry, “it’s time to innovate and create.” And as for the matter of competition, we live in a world with plenty of choice.

Not so say the proponents of the FCC Inquiries. The argument here is that it isn’t fair that users would be locked into AT&T to have an iPhone, that all phone models should be available for all carriers. Of course, this could be a problem – notably if carrier A (not necessarily AT&T) were to say, “we’d subsidize the phone more than carrier B.” Wouldn’t that in turn provide the larger carriers, such as AT&T and Verizon, with an advantage over the smaller carriers?

And if pricing for the handsets were to be the same, wouldn’t the next step to be to provide similar pricing? That only seems fair. So at the end of the day, all the carriers are offering the exact same products, at the exact same price and with the exact same features. Take it a step further and let them share the same network, so everyone gets the same signals wherever they go. But wouldn’t this be a step back to the days of the original AT&T? It certainly seems like it!
Contrast the Competition in China
This might sound ironic, it might even sound unlikely. But consider that in China, three of the largest carriers are actually state owned, but encouraged to compete. These carriers provide different handsets, different services and different plans. In other words, Communist China has gone out of its way to create an artificial marketplace that offers competition.

Meanwhile, in the United States we have a market that already has competition, with four carriers including AT&T, Verizon, Sprint and T-Mobile, as well as many second tier providers. Clearly this is choice, and in many markets far more choice than consumers have for cable TV. Choice is a good thing and competition is a great thing, but trying to create it artificially doesn’t seem like it would spur innovation.